Rise in Poverty and the Uninsured Results from Bad Policy

Liberals have seized on the release of new poverty and uninsurance rates in the Census Bureau’s Current Population Survey as evidence of the virtue of their massive expansion of government spending programs and new health insurance entitlement. But is this really true?

It is hardly surprising that a severe recession would increase poverty. Neither is it a shock that the employer-based system would be stressed by severe labor market conditions. Maybe the answer is less, or at least better, economic policies that would spill over to improved rates of health insurance. Indeed, a closer look reveals that a significant portion of the increase in uninsured Americans, 41.3 percent, is attributable to the failure of the Obama policies to spur economic activity as promised.

As part of selling the American Recovery and Reinvestment Act -- “stimulus” in the political parlance -- the White House predicted that it would ensure that unemployment remained below 8 percent. As a dismayed labor force is well aware, the unemployment rate is currently 9.6 percent and averaged 9.3 percent during 2009. The “jobs gap” -- the difference between promise and reality -- means that 1.8 million more Americans were in the ranks of the uninsured in 2009.

Lost jobs means lost health insurance. We estimate that more than 2 million Americans would have been able to keep their private health insurance had the Obama administration met its promise.[1] Our estimates indicate that with each additional 1 percent increase in annual unemployment: (a) employer-based coverage declines 0.93 percent, (b) individual and non-group coverage increases 0.14 percent, (c) Medicaid enrollment increases 0.34 percent, and (d) the net result is an increase of the uninsured population at a rate of 3.6 percent (see table).

Policy matters. Good economic policy has broad-based benefits that extend beyond the narrow confines of GDP growth, productivity statistics, or monthly employment totals. No amount of messaging can disguise the fact that today’s bad news reflects in part yesteryear’s bad decisions.

[1] Based on Holahan J, Garrett, A. “Rising Unemployment, Medicaid and the Uninsured.” Kaiser Family Foundation. January 2009: http://www.kff.org/uninsured/upload/7850.pdf. We use a weighted average to conservatively account for adult and child coverage eligibility differences.